A system for buying and selling personal information could work if there’s an intermediary between the buyer who needs the data set and individual sellers keen to provide their private data at a price.

A Role for the Middle Man in Creating a Market for Unbiased Personal Data

It’s one of the great paradoxes of the Internet: entire business models are built on the use of personal data which consumers volunteer without any remuneration. So it wouldn’t be too unreasonable for those individual informants to obtain some kind of fee. After all, the more precise the data provided, the more efficient will be the marketing or sales effort on which it is based. Accordingly, two researchers from the Social Computing Group, HP’s research arm, have designed a market for buying and selling personal data which would benefit both the buyer and the individual donor whose data he wants to use. The key issue is to set the right price for the data, taking into account both the value of the data itself and the degree to which the donor is sensitive about his or her data being used. Whenever a person announces that his or her private data is for sale, s/he will probably claim that it contains important and sensitive information so as to obtain the maximum fee possible. This risks distorting the market and therefore the balance of the data samples.

Unbiased information

In order to remedy this potential bias, a key component of the model is the "market-maker", an intermediary who buys and collects data from individuals and takes on the job of selling the data on terms and conditions that have been pre-agreed by the sellers. The market-maker follows several steps. First he asks each seller a series of questions. For each question, the seller may select between different pricing schemes that enable a future buyer to access his or her data and s/he can also always opt out of giving certain information. The market-maker’s art is all about setting the right price so as to minimise the number of opt-outs. Then when a buyer sends a request to the market-maker, he constructs a pricing menu for the request so as to provide the volume of data required at a reasonable price. The buyer pays, draws the data samples and the middle man then pays the individual sellers according to the terms agreed at the outset, retaining a commission for himself. A crucial point is that such a data sample is judged to be unbiased since it has been put together by the market-maker in line with the request.

Three payment formulae to choose from

When negotiating with sellers, the middle man could offer a choice between three systems of payment for a given piece of data. The first formula is that the individual seller gets paid for data if and when a buyer calls for it, but there’s no payment if no-one actually wants the information. The second formula would see the provider paid just for supplying the information, whether it’s used or not. Thirdly, there would of course be no payment if the provider opts out of giving information. The price menus offered to buyers would be on this basis. The seller would retain full discretion as to what information s/he will or will not provide, but s/he wouldn’t set the final selling price. The report’s authors argue that this model has the advantage of being a variant of a system already well-known to Internet users, with an intermediary who guarantees the transaction and earns a commission on each sale - PriceMinister being a good example. In this case however, the goods being sold consist of private data provided voluntarily by an individual and stored in a secure database.